ABC THE BUSINESS
WEDNESDAY, 5 JUNE 2019
SUBJECTS: Income tax cuts; National Accounts; Liberals’ fake surplus
ELYSSE MORGAN: Shadow Treasurer Jim Chalmers joined me from Brisbane. Dr Jim Chalmers, has your Shadow Cabinet discussed a compromise to support the Government's tax cuts for 2022, so the second tranche if you like?
JIM CHALMERS, SHADOW TREASURER: A couple of things about that, Elysse. As you would expect, I don't intend to go to the details of discussions we have had, but in our first meeting as the new Albanese Shadow Ministry here in Brisbane yesterday, obviously we talked about all the policy issues before us. We didn't take any final decisions about those issues, including the tax cuts. But we had a good discussion about what we needed to learn from the election outcome less than three weeks ago, and what we need to do when Parliament resumes.
MORGAN: It sounds like someone has talked about it in the press. It was reported in The New Daily today.
CHALMERS: I'm obviously aware of that report by Sam Maiden. What I'm telling you is, first of all, it's not my form to talk about those kind of conversations. But secondly, I can assure you and your viewers that we have not taken any decisions about the tax cuts, except to support the first tranche of those tax cuts, which are the ones that the Reserve Bank is counting on to try and get the economy moving again; to try to get some disposable income into the hands of people on low and middle incomes in this country to try to turn things around. We've said for some time that we'll support that. We've also said for some time that we are still considering stages two and three. They don't come in, of course, until 2022 and 2024, so they would have no impact on the economy in the near term. Our focus is on that first tranche.
MORGAN: The economy, as you pointed out today in your press conference following the GDP print, it is in fairly dire straits. No matter what you think about the way the Government has actually structured these tax cuts, why not just let them through? Why not get that stimulus into the economy as quickly as possible?
CHALMERS: We are absolutely keen to get the stimulus from the first tranche into the economy for all of the reasons that the Reserve Bank has identified, all of the reasons that we've been talking about. We are enthusiastic supporters of giving low and middle-income earners that tax relief, up to $1080 of tax relief. We do need to boost consumption in the economy. We saw that in the National Accounts today. We saw that in the Reserve Bank statement yesterday when they were forced to cut rates to extraordinary new lows of 1.25 per cent. So we're up for that. The other tranches of the tax cuts, stages two and three, don't come in for some years if they're legislated. And so they won't actually have any impact on the economic challenges that have arisen, particularly in the last three quarters.
MORGAN: But if you just jump out of the way and just sign off on these, then we will get that stimulus into the economy and put the economy on a better footing surely for 2022 when the next tranche will come through?
CHALMERS: There is absolutely no reason for the Government not to split the bill so that we can all pass it. I suspect the first tranche would probably pass unanimously through the Parliament. Anthony Albanese has even offered to pass them very quickly, the first tranche. There is nothing stopping the Government from splitting it out. Disappointingly, the Government would prefer to have a fight with us over the latter stages than to actually get that tax relief into the system.
MORGAN: You're an economist, do you believe Australia is at risk of recession given the headwinds we face and given the trend that we're now on?
CHALMERS: I don't get into that kind of irresponsible scaremongering about the future of the economy. I am genuinely worried that we have been and will continue to be in a period of sub-par growth because the Government does not have a plan to get us out of this. The Reserve Bank is running out of ammunition. Rates are now at 1.25 per cent, remembering that the cash rate bottomed out at three per cent during the Global Financial Crisis. We haven't had growth this weak for a decade, since the GFC. That's very troubling. We are prepared to play a responsible role in helping the Government to turn that around, but the Government, for their part, has to stop pretending it's somebody else's fault and they need to take responsibility.
MORGAN: Given where we are, and the Reserve Bank continually calling for fiscal help in the economy, don't you think it is time that parties, the Government with the support of Labor, stop pursuing the surplus?
CHALMERS: I don't necessarily think that's the case, Elysse. Even in the numbers today, I don't think the Government has any excuses for falling short on the surplus for the coming year, because profits are still I think 11 per cent, and I think prices for our resources have held up. Really the weakness in the economy is in the people-facing part of the economy - wages, consumption and the like. The Government doesn't have any excuse for falling short on their surplus commitment.
MORGAN: So you're not going to let them off if they decide that they will ramp up spending in the economy to try and lift productivity and growth?
CHALMERS: We will judge any new policies on their merits and considering the economic conditions at the time. I guess the point that I'm making now is that there is nothing in the numbers which were released today which would substantially alter or give the Government any substantial excuse not to meet the commitment for next year to deliver the surplus. They want everybody to believe they have already delivered it. You and I both know that is a con, and that there is some substantial downside risk in the forecast. But I think when it comes to company profits and prices for our resources, they have held up. If the Government falls short of the commitment they will have a lot of explaining to do.
MORGAN: Jim Chalmers, thank you so much for your time.
CHALMERS: Thanks Elysse, all the best.